Kerry Pianoforte10.17.07
The global titanium dioxide market is currently valued at approximately $10 billion. According to Scott Detiveaux, a senior consultant at Orr and Boss, coatings represent 55-60% of the global demand for TiO2. Of this, architectural coatings represents approximately 65-70% of overall coatings demand for TiO2.
The Asia-Pacific region has become the largest consumer of TiO2 and now comprises nearly one-third of total global demand. "We project a strong demand for TiO2 as the Chinese economy grows," said Carlos Verdejo, global offering manager for coatings, DuPont Titanium Technologies. "We currently serve Asia with our plant in Taiwan, and are in the early stages of building a world class plant in Dong Ying, in the PRC. This allows us to increase our supply of locally produced material in Asia and to position ourselves to grow within China."
"The Asia-Pacific region is a key strategic growth area for Tronox," said David Sheldon, business manager for Tronox. "Tronox has a major presence in the region supported by our Tiwest joint venture operation located in Western Australia. This fully integrated facility, from mining to finishing, currently supplies the majority of its annual production to customers throughout the Pacific Rim. With our global production capability, coupled with our market strategies and customer base in the region, we have maintained a position as one of the leading suppliers to the region."
The Asia-Pacific region is projected to be the world's largest pigment consuming region by 2010. "This increase in demand is driven primarily by China's explosive growth and increasing demands for quality of life products that contain TiO2," said Sheldon.
To meet TiO2 demands in the rapidly growing Asia-Pacific region, Tronox and its Tiwest joint venture partner South African-based Exxaro Resources Limited subsidiary, Yalgoo Mineral Pty Ltd., announced plans in February 2007 to increase annual production capacity at the Tiwest titanium dioxide pigment plant in Kwinana, Western Australia.
Rising energy costs continue to place pressure on titanium dioxide suppliers, who have in turn been forced to raise prices. TiO2 requires a lot of energy to manufacture and ship.
"The correlation between energy prices and variable cost are quite high," sad Verdejo. "We have seen significant cost increases in the last seven years. According to the producer price data published by the U.S. Bureau of Labor Statistics, natural gas prices and chlorine have increased by 130% since 2000."
According to Verdejo, data from the same source show TiO2 average prices have been flat in the same period with ups and downs impacted by supply and demand. This imbalance between the TiO2 costs and prices have inevitably had an adverse impact on the financial performance of TiO2 producers. "Our estimates show that the TiO2 industry as a whole may not be earning cost of capital today," Verdejo said. "Despite continual improvements in cost productivity we have been unable to significantly offset the structural increases in energy-derived inputs through such initiatives."
As a result, this summer DuPont announced global price increases. These increases are expected to improve DuPont's ability to continue to serve its customers' profitability and to reinvest in its business to meet the projected growth in global TiO2 demand."
"A ten-year analysis of market pricing of titanium dioxide pigments and several of the industry's key inputs clearly show that pigment prices have declined while input costs have increased significantly," said Sheldon. "During this period, we also have experienced increased energy costs. Our customers and suppliers by and large have been able to improve their margins during the same period by passing along higher costs through price increases. As a result, we have seen a margin squeeze in the industry."
"Currently, global consumption growth is exceeding the forecast for new capacity and sources of low-cost Chinese-made pigments are becoming less plentiful as a result of stricter environmental controls and reduced export incentives," Sheldon continued. "We believe the supply-demand fundamentals and the increasing costs of TiO2 inputs provide support for global price increases, and we took steps to improve our top line, with price increase announcements in July."
According to Sheldon, TiO2 suppliers will continue to focus on cost management and productivity improvements. However, meaningful TiO2 price increases will be needed to ensure that growing demand is satisfied and market volatility avoided.
Titanium dioxide suppliers also face a lot of pressure from their customers in the paint industry. Today's customers expect more from their paint in terms of performance, coverage and appearance. To meet this demand, new grades of TiO2 are continually being designed to provide greater value to the coatings manufacturer and the coatings consumer.
"We are constantly gathering 'voice of the customer' data so that we can react quickly to market needs," said Verdejo. "An example of this is the recent enhancement of one of our older grades. Customers liked the end-use performance of the original grade, but wanted it to be easier to disperse. The result is a grade that retains its original paint performance, but allows the coatings producer to cut back on the amount of time and energy required to make the paint."
Paint products cover a wide spectrum of price points, performance levels and regulatory compliance limits, which place a myriad of demands on titanium dioxide supplies.
"New low VOC and no VOC coatings products are typically heavily loaded formulations using state of the art vehicles," said Sheldon. "Such products are growing in demand, driven both by regulatory mandates and effective differentiated marketing efforts. These new products require TiO2 pigments that provide optimum hiding power and gloss with minimal variation in properties that impact appearance. These same pigments must also perform in lightly loaded, contractor-grade paint products that test the limits of coverage and cost per gallon. TiO2 manufacturers are meeting this challenge with improved products and strict process controls."
In addition to offering various grades of TiO2, suppliers need to provide technical service to help their customers get the most out their products.
"We believe all coatings makers should be using TiO2 as efficiently as possible, since no one benefits in the long term from waste due to inefficiency," said Verdejo. "That said, there are cases where coatings products are falling short of their hiding power potential. Sometimes reformulation is needed, particularly with respect to keeping the TiO2 particles well dispersed during pigment drying, when the liquid environment is changing rapidly and drastically. The key here is to alter the dispersant and other additives to create a robust dispersion. In other cases, changing pigment grade can improve performance. New pigment grades are formulated to take maximum advantage of the chemistry of new dispersants and additives."
Paint companies may be tempted to use fillers of various types in attempts to reduce TiO2 use and decrease their cost. "Use of these extenders can have a very negative impact on other performance properties important to the end-use paint customer, such as touch-up, wet hiding, stain resistance and scrub resistance," cautioned Sheldon. "Tronox works directly with customers to optimize their paint formulations and manufacturing process methods to get the best possible performance from the TiO2 with minimal impact on other key performance properties. By getting the best possible performance from your TiO2 you can maintain the best overall combination of properties in the paint at a reasonable cost."
The Asia-Pacific region has become the largest consumer of TiO2 and now comprises nearly one-third of total global demand. "We project a strong demand for TiO2 as the Chinese economy grows," said Carlos Verdejo, global offering manager for coatings, DuPont Titanium Technologies. "We currently serve Asia with our plant in Taiwan, and are in the early stages of building a world class plant in Dong Ying, in the PRC. This allows us to increase our supply of locally produced material in Asia and to position ourselves to grow within China."
"The Asia-Pacific region is a key strategic growth area for Tronox," said David Sheldon, business manager for Tronox. "Tronox has a major presence in the region supported by our Tiwest joint venture operation located in Western Australia. This fully integrated facility, from mining to finishing, currently supplies the majority of its annual production to customers throughout the Pacific Rim. With our global production capability, coupled with our market strategies and customer base in the region, we have maintained a position as one of the leading suppliers to the region."
The Asia-Pacific region is projected to be the world's largest pigment consuming region by 2010. "This increase in demand is driven primarily by China's explosive growth and increasing demands for quality of life products that contain TiO2," said Sheldon.
To meet TiO2 demands in the rapidly growing Asia-Pacific region, Tronox and its Tiwest joint venture partner South African-based Exxaro Resources Limited subsidiary, Yalgoo Mineral Pty Ltd., announced plans in February 2007 to increase annual production capacity at the Tiwest titanium dioxide pigment plant in Kwinana, Western Australia.
Rising Energy Costs
Rising energy costs continue to place pressure on titanium dioxide suppliers, who have in turn been forced to raise prices. TiO2 requires a lot of energy to manufacture and ship.
"The correlation between energy prices and variable cost are quite high," sad Verdejo. "We have seen significant cost increases in the last seven years. According to the producer price data published by the U.S. Bureau of Labor Statistics, natural gas prices and chlorine have increased by 130% since 2000."
According to Verdejo, data from the same source show TiO2 average prices have been flat in the same period with ups and downs impacted by supply and demand. This imbalance between the TiO2 costs and prices have inevitably had an adverse impact on the financial performance of TiO2 producers. "Our estimates show that the TiO2 industry as a whole may not be earning cost of capital today," Verdejo said. "Despite continual improvements in cost productivity we have been unable to significantly offset the structural increases in energy-derived inputs through such initiatives."
As a result, this summer DuPont announced global price increases. These increases are expected to improve DuPont's ability to continue to serve its customers' profitability and to reinvest in its business to meet the projected growth in global TiO2 demand."
"A ten-year analysis of market pricing of titanium dioxide pigments and several of the industry's key inputs clearly show that pigment prices have declined while input costs have increased significantly," said Sheldon. "During this period, we also have experienced increased energy costs. Our customers and suppliers by and large have been able to improve their margins during the same period by passing along higher costs through price increases. As a result, we have seen a margin squeeze in the industry."
"Currently, global consumption growth is exceeding the forecast for new capacity and sources of low-cost Chinese-made pigments are becoming less plentiful as a result of stricter environmental controls and reduced export incentives," Sheldon continued. "We believe the supply-demand fundamentals and the increasing costs of TiO2 inputs provide support for global price increases, and we took steps to improve our top line, with price increase announcements in July."
According to Sheldon, TiO2 suppliers will continue to focus on cost management and productivity improvements. However, meaningful TiO2 price increases will be needed to ensure that growing demand is satisfied and market volatility avoided.
Titanium dioxide suppliers also face a lot of pressure from their customers in the paint industry. Today's customers expect more from their paint in terms of performance, coverage and appearance. To meet this demand, new grades of TiO2 are continually being designed to provide greater value to the coatings manufacturer and the coatings consumer.
"We are constantly gathering 'voice of the customer' data so that we can react quickly to market needs," said Verdejo. "An example of this is the recent enhancement of one of our older grades. Customers liked the end-use performance of the original grade, but wanted it to be easier to disperse. The result is a grade that retains its original paint performance, but allows the coatings producer to cut back on the amount of time and energy required to make the paint."
Paint products cover a wide spectrum of price points, performance levels and regulatory compliance limits, which place a myriad of demands on titanium dioxide supplies.
"New low VOC and no VOC coatings products are typically heavily loaded formulations using state of the art vehicles," said Sheldon. "Such products are growing in demand, driven both by regulatory mandates and effective differentiated marketing efforts. These new products require TiO2 pigments that provide optimum hiding power and gloss with minimal variation in properties that impact appearance. These same pigments must also perform in lightly loaded, contractor-grade paint products that test the limits of coverage and cost per gallon. TiO2 manufacturers are meeting this challenge with improved products and strict process controls."
In addition to offering various grades of TiO2, suppliers need to provide technical service to help their customers get the most out their products.
"We believe all coatings makers should be using TiO2 as efficiently as possible, since no one benefits in the long term from waste due to inefficiency," said Verdejo. "That said, there are cases where coatings products are falling short of their hiding power potential. Sometimes reformulation is needed, particularly with respect to keeping the TiO2 particles well dispersed during pigment drying, when the liquid environment is changing rapidly and drastically. The key here is to alter the dispersant and other additives to create a robust dispersion. In other cases, changing pigment grade can improve performance. New pigment grades are formulated to take maximum advantage of the chemistry of new dispersants and additives."
Paint companies may be tempted to use fillers of various types in attempts to reduce TiO2 use and decrease their cost. "Use of these extenders can have a very negative impact on other performance properties important to the end-use paint customer, such as touch-up, wet hiding, stain resistance and scrub resistance," cautioned Sheldon. "Tronox works directly with customers to optimize their paint formulations and manufacturing process methods to get the best possible performance from the TiO2 with minimal impact on other key performance properties. By getting the best possible performance from your TiO2 you can maintain the best overall combination of properties in the paint at a reasonable cost."
